The Waiting Game

Why is the City of Austin slamming the brakes on app-based car services?

By Kimya Kavehkar

Published: June 2, 2014

For anyone who’s attempted to catch a cab downtown on a Saturday night or depended on the underdeveloped public transportation system, it’s clear that getting from point A to point B in this town is chaotic, unreliable and just plain hard.

In cities with far more sophisticated transportation infrastructures than ours, such as New York and San Francisco, there’s already another convenient and efficient option for those who still have issues getting around: smartphone app-based services like Uber, Lyft and Sidecar, also known as transportation network companies, or TNCs. With these apps, there’s no need to make a reservation or wait for an available driver. Just open the app, find the driver closest to your current location, hop in the car and pay for the trip through your credit card stored on the app.

With Austin being an ever-growing cultural hot spot teeming with young professionals who take full advantage of the nightlife, it seems like the perfect market for TNCs. But when Uber, Sidecar and Austin-based Heyride (later purchased by Sidecar) tried to launch their services here over the past few years, the city quickly shut them down, claiming there wasn’t a proper way to regulate these services since they aren’t taxis, limos or carpools. So far, TNCs have been made to adhere to the same regulations that taxis and limos have, which make them difficult to operate under their current business models. It’s left TNC operators wondering why coming up with new regulations is taking so long.

Chris Nakutis, the Chicago-based general manager of Uber’s Midwest division, has made it his mission to bring Uber to the capital city, but so far he’s been unsuccessful. Currently, Austin defines Uber as a limousine service, since it provides private, compensated rides in sedans and SUVs. For Uber to operate legally here, it would need to charge a $55 minimum and have a 30-minute wait time, which would render Uber expensive, exclusive and inconvenient—everything that the company is trying to avoid. “Our tagline is ‘Everyone’s Private Driver,’” Nakutis says. “Those laws are specifically in the books so only wealthy people can use limos. That’s not who we are. We want people to have safe and reliable rides regardless of how much they make.”

Nakutis thinks that these laws protect the few livery franchises in Austin at the expense of residents’ wants and needs. “The few taxi companies that exist in Austin make a lot of money, and that’s not the drivers, that’s the owners,” Nakutis says. “We pride ourselves on competition and free market, but there are some hidden monopolies that still exist in our society, and one of them is taxis.”

Sunil Paul, the CEO of Sidecar, who has faced similar battles with Austin—even resulting in a now-dropped lawsuit—echoes those sentiments. “I think the taxi lobby has too much control, and the city council has turned into protectionists instead of supporting innovation,” he says. SideCar, which received a cease-and-desist letter from Austin in February 2013, works a little differently than Uber. Whereas Uber uses professional drivers or drivers who have passed a driving test and have general base and mileage rates, Sidecar has volunteer drivers who set their own prices per trip. Both services train and background-check drivers and require insurance for their vehicles.

Even though they operate differently, Uber being closer to a car service and Sidecar being closer to a ride-sharing service, they both blame the taxi lobby for keeping them out of Austin. Councilman Chris Riley, who has been heavily involved in discussions, denies that claim. “I wouldn’t say that representatives of taxi companies have any inherent advantage over representatives of TNCs,” he says. “Except the taxicabs have been around longer. We’ve had more time to sift through those issues and have a better handle on what regulations work.” (Calls to taxi companies were not returned.)

Riley does acknowledge that the city is still open to having TNCs operate in Austin. “We are hearing an increasing number of concerns about the adequacy of our current services,” he says. “The taxicab services have their franchises up for renewal in August 2015, so a group is in place to talk about how and what, if any, adjustment to the regulations are appropriate. We have another group that’s working on the regulations for TNCs like Uber and Sidecar.”

But Paul isn’t convinced that movement toward change is happening. “We dropped that lawsuit in a show of good faith because there was a discussion of doing a pilot, but we have not seen that pilot transpire,” he says. “We’ve had occasional conversations over the past year, but frankly we just haven’t seen any progress, and it’s discouraging.”

While city officials don’t seem to be in a rush to adjust regulations, the popularity of TNCs has exploded on an international level. In the past year, Uber went from being active in 12 cities to 85 across the world, including previously resistant San Antonio. “Austin is becoming more and more of an island,” Nakutis says. “Now, it’s not a question of how innovative is Austin relative to San Francisco or Boston, but how innovative is Austin relative to Mumbai and Bangkok?”

The push-and-pull continues with no clear end goal or timeline. But this is old hat for Austinites; they’re used to waiting a long time for a ride.

On May 15, after this issue went to print, the City Council approved a resolution to explore the possibility of bringing ridesharing services into Austin. Lyft also announced service to Austin on May 29 but will still have to fight city reform first.